Cameron out of touch - Miliband

Ed Miliband seized on reports of division within the Government during Prime Minister's Questions

Labour leader Ed Miliband has accused the Prime Minister of being "totally out of touch" for attempting to protect bankers' bonuses while disabled people with spare rooms were being hit by the Government's "bedroom tax".

During a combative Prime Minister's Questions session, Mr Miliband seized on reports of division within the Government, highlighting unrest on David Cameron's backbenches and rumours of a leadership campaign by Home Secretary Theresa May.

Mr Cameron hit back with an attack on Labour's economic record, calling Mr Miliband the "croupier in the casino when it all went bust". He said the Labour leader had no plans to deal with the deficit and had opposed £83 billion in savings on the welfare budget.

Chancellor George Osborne was despatched to Brussels on Tuesday to oppose European attempts to cap bank bonuses. The Chancellor said he could not support "the proposal currently on the table" but he was firmly told the "broad majority" of the 26 other European Union nations were in favour of the new laws.

In the Commons Mr Miliband claimed to have a letter from "John the banker" who was "worried" about his bonus being capped at £2 million under the proposals to limit the payout to twice the level of salary.

Mr Cameron told the Labour leader: "Under this Government bonuses are one quarter of what they were when you were in the Treasury. I will take lots of lectures from lots of people, but I don't have to listen to the croupier in a casino when it all went bust."

Mr Miliband said negotiations on the EU proposals were led by a Conservative MEP and asked: "Why are the Prime Minister and Chancellor the only people who think it's a priority to fight for bigger bonuses for bankers?"

The Prime Minister said Mr Miliband was "completely wrong" and added: "We have some of the toughest rules on bonuses and the toughest rules on transparency of any major financial centre anywhere in the world."

But he said there were important national interests at stake, with the UK responsible for 40% of the EU's financial services industry and "we ought to make sure they go on contributing to our exchequer". He told Mr Miliband: "You might want to pose and play politics but we care about these things."

The ringfence around retail operations would ensure that the "complete shambles" under Labour "can never happen again".